High costs to dent McPherson’s profit

Consumer products supplier
McPherson
’s has warned that December-half net profit will dip about 2 per cent as higher costs and increased spending on promotions offset strong growth in sales from recent acquisitions.

McPherson’s managing director Paul Maguire said net profit for the six months ending December was expected to fall 2 per cent to $10.2 million - in line with consensus forecasts around $10.12 million.

Bottom line net profit is expected to fall 17.8 per cent to around $9 million after restructuring costs and other one-off costs.

McPherson’s is the third consumer goods company to downgrade interim earnings after what appears to have been a mixed Christmas trading period for retailers.

Super Retail
Group and
The Reject
Shop have also warned that margin pressure and weaker than expected sales growth will stunt first half earnings.

Mr Maguire has also flagged further asset write-downs, saying McPherson’s is reviewing the carrying value of goodwill and brand names on its balance sheet.

McPherson’s, which makes Manicare and Lady Jayne personal care products and Wiltshire and Stanley Rogers homewares, reported a $32 million loss in 2013 after slashing the value of goodwill and brands in its Australian business by $50 million.

December-half revenues are expected to rise about 18 per cent, but most of the growth has come from recent acquisitions, including Dr LeWinn and Revitanail beautiy products and Think Appliances.

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Mr Maguire said McPherson’s had raised prices in the first half, in an attempt to relieve margin pressure. But earnings remained under pressure from the weaker Australian dollar, the subdued retail sales environment, increased promotional trade spending, rising product costs and increased competition from private label products.

Mr Maguire said the company’s policy of distributing at least 60 per cent of full year net profit remained in place.